Steps for Winding Up an Alcohol Business
Winding up a business, especially in the world of alcohol manufacturing, involves a detailed process divided into three main parts: regulatory requirements, handling creditors’ claims, and managing assets. Here’s a breakdown of what each of these involves:
For alcohol manufacturers, meeting regulatory demands is a crucial step in winding up operations. This primarily revolves around dealing with unpaid taxes on alcohol and reporting operations.
- Tax Payment and Delivery: Alcohol, including work in progress, must either be (a) taxed and removed from the premises or (b) destroyed under supervision by the Florida Division of Alcoholic Beverages and Tobacco (ABT). Removal from the premises can be in the form of delivery to a distributor, sale through a licensed taproom or tasting room, or (in the case of wine and distilled spirits, but not beer) delivered to another licensed manufacturer via transfer in bond.
- Refund for Destruction of Taxpaid Alcohol: If taxpaid alcohol is destroyed, a refund of federal and state excise taxes paid can be requested.
- Reporting to Regulatory Bodies: Final reports to the ABT and TTB (Alcohol and Tobacco Tax and Trade Bureau) must show a zero balance in the ending inventory. Additionally, applications to terminate alcoholic beverage licenses and permits need to be filed with these regulatory bodies.
Clearing dues to creditors is a significant responsibility during the business wind-up. Alcohol manufacturing companies commonly owe payments to various entities, including employees, IRS, TTB, State Departments of Revenue, lenders, landlords, and trade creditors.
- Priority in Payment: Payment order typically follows a hierarchy, beginning with government agencies and secured lenders, then moving on to other lenders, landlords, and finally unsecured commercial lenders.
- Personal Guarantees: Owners are often personally responsible for the company’s debts, especially if personal guarantees were given to lenders. Negotiating with lenders for reduced payments might be an option when assets are insufficient to cover all debts.
Liquidating assets is a critical step in paying off creditors and distributing remaining resources to the owners.
- Types of Assets: Assets of an alcohol manufacturing company encompass equipment, inventory, intellectual property, cash, accounts payable, and more.
- Asset Distribution: Brands can be sold but might still be subject to exclusive distribution rights. Unsold assets (except for untaxed alcohol) should be given to the owners. However, owners receiving assets while debts exist might become personally liable for those debts up to the value of the received assets.
- Owner Distributions: Once debts are settled, remaining assets should be distributed to owners based on their ownership interests, as outlined in the Operating or Shareholders Agreement.
Wrapping up an alcohol manufacturing business involves meticulous attention to regulatory obligations, creditor settlements, and asset handling. Owners need to be cautious about personal liabilities, especially regarding asset distributions and outstanding debts. Understanding the process is crucial to navigate the complexities and responsibly conclude the business’s affairs.
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Because we’re attorneys: Disclaimer. Posted December 10, 2023.